Walmart (WMT) intends to use what it charges for groceries as a weapon against its competition. By lowering prices, it may have the dual effect of drawing new shoppers and helping the overall economy.
Walmart has decided that the route to the heart of the cash-strapped consumer is through his stomach. Grocery prices are a significant piece of most family monthly budgets. Walmart intends to ease that burden while bringing customers into its stores at the same time. It could be persuasively argued that lower food prices give shoppers more discretionary income. In theory, that should help accelerate consumer spending.
The other side of the Walmart program is the extent to which it will pressure margins at some local grocers which will in turn make it difficult for them to employ the number of people that they already do. Walmart has crushed many retailers with its low prices over the years. The fate of grocery stores located near Walmart stores may be no different.
At least people with modest means can buy what they need to eat in many cases. Even if it puts other people out of work in the process.
Douglas A. McIntyre.
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